Peabody bows out of TPI recapitalisation

Terry Peabody
’s holding in the company he founded more than 20 years ago,
Transpacific Industries Group
, will be nearly halved after sitting out of the company’s latest recapitalisation.

Transpacific plans to raise $309 million in fresh equity as part of a major refinancing package, which included a syndicated $1.525 billion debt facility.

Mr Peabody’s stake will shrink to just 6.39 per cent from 10.5 per cent after TPI indicated the former executive chairman was not planning on taking up his rights, though he remained the second biggest shareholder.

“Terry is not participating but we met last week over lunch and he is strongly supportive of this transaction," new chief financial officer Stewart Cummins told The Australian Financial Review.

“He didn’t say why is not taking up his rights . . . but he has got a fairly significant financial interest and is keen to see a re-rating in the stock."

The share price has been pressured after the company faced large write-downs on assets and short-term maturities on debt, with $601 million debt due in July 2013.

TPI, which is in the middle of rebuilding after almost collapsing under $2.3 billion of debt during the global financial crisis, is issuing up to 618 million new shares through a nine-for-14 entitlement offer at 50¢ a share that increases its issued capital by 64 per cent.

The offer price is a 27.5 per cent discount to the TPI closing price of 69¢ on Tuesday.

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Transpacific said the equity issue, which will be used to repay borrowings, and the new financing package would lead to lower, cheaper and longer term debt for the company.

It expects $31 million a year in annual interest savings from the new structure.

Chief executive officer
Kevin Campbell
said the new debt facility comprised of eight lenders – the big four Australian banks, Macquarie, Rabobank and two Japanese banks – and would provide a well-spread debt-maturity profile with no refinancing requirements until November 2014. It would also enable the company to refinance other debt instruments early.

Mr Campbell was focused on selling assets such as freehold properties and other non-core assets from which proceeds would be used to repay debt.

TPI yesterday forecast full-year 2012 earnings before interest, taxes, depreciation and amortisation (EBITDA) of $452 million and profit before tax and significant items of $119 million, against $255 million and $73 million respectively for 2011.

Mr Peabody once held roughly 24 per cent of the company but that was whittled down to 17 per cent in 2009 after US private equity firm Warburg Pincus led an $801 million recapitalisation and became a cornerstone investor in the waste-management company.

Mr Peabody, who founded the company in 1987, left the board in frustration last June but has been an active shareholder since.

Last March, he was said to have been seeking the support of fund managers for a board shake-up. Nearly a year ago, he teamed up with institutional shareholders to oust then independent directors
Graham Mulligan
and
Bruce Allan
, despite Warburg Pincus supporting their re-election.

Warburg Pincus holds nearly 34 per cent of TPI and has committed $207 million to take up its entitlement in full of about $105 million and to sub-underwrite a further $102 million. TPI directors are also planning to take up their entitlements.

Mr Peabody, who is the company second-biggest shareholder, has met several times with Mr Cummins since being appointed CFO five months ago.

“He always wanted to know what we were doing about supporting the share price," Mr Cummins said. “He is a shrewd businessman and the architect of this company."

Mr Cummins said Mr Peabody held ordinary securities and hybrids, and had other business interests around the world so he “may or may not have money to put in" to TPI at this time.